Medicaid Debt Can Cost You Your House

Some states initially resisted implementing estate recovery. West Virginia legislators called it “abhorrent” in a federal lawsuit seeking to have it declared unconstitutional. (An appeals court rejected the suit in 2002.) Michigan became the last state to enact recoveries, in 2007, after the federal government threatened to cut its Medicaid funding if it didn’t. Other states opted to collect only high-value assets, or offered exemptions for family farms or estates worth less than a few thousand dollars.

…One of the reasons estate recovery works at all is that few people know about it. Although states disclose the policy in their Medicaid-enrollment forms, it’s often buried in fine print that can easily be overlooked, especially when applicants are anxiously seeking urgent medical care.

…Defenders of estate recovery see it both as a way to control the high costs of long-term care and as a necessary check on those who could pay for such care but would rather the government foot the bill. (Nursing homes cost $89,000 a year, on average, for a semiprivate room.) 

…The total amount states recouped jumped from $72 million in 1996 to $347 million seven years later—but even so, estate recoveries accounted for less than 1 percent of Medicaid’s total nursing-home costs in 2003.

…The mortgage-interest deduction alone—a set of housing subsidies that primarily benefits Americans in the top 20 percent of the income distribution—cost the federal government $66 billion in 2017. By comparison, letting every family of a Medicaid recipient keep their property would cost just $500 million, according to 2011 data gathered by the Office of the Inspector General, the most recent available.

…Opponents of estate recovery say that the harm of destabilizing low-income families does not justify the meager returns. “It’s a drop in the bucket given the amount of misery they cause people,” says Patricia McGinnis, the executive director of the California Advocates for Nursing Home Reform, which co-sponsored successful 2016 legislation to limit the assets Medicaid can recover in California. “It’s a terrible program, it’s a punitive program, and it doesn’t do anything to reimburse the billions of dollars spent,” she told me. “The purpose of recovery was to support Medicaid and bring money back, but how? By collecting anything from the poorest of the poor? It’s ridiculous.”

…Perversely, then, the program punishes neither the affluent nor those with nothing to lose, but working- and middle-class Americans who, despite the odds, have managed to scrape together a little something to pass on to their children.

…In a country that protects the passage of inter-generational wealth for its most privileged sons and daughters, there’s a special indignity to having to fight for a trailer, or $93, or a shack at the edge of an Iowa cornfield that’s of virtually no value to the government but has meant everything to us. As my wealthier peers in New York inherit summer houses, art collections, and trusts—their riches maximized by an ever-eroding estate tax—it compounds the sense of shame my mother feels in failing to leave her children with even a modest leg up, and in knowing that, had she been better informed, she might have prevented it all.

…If homeownership is one of the greatest means of upward mobility, then estate recovery, a program that strips property from the people who stand to benefit from it the most, is an insidious obstacle, perpetuating cycles of poverty and pushing displaced families back into the welfare system.

…Musgrave, who works for the state’s handgun-permit office, makes $31,000 before taxes. “There’s no way I would even qualify for a loan to get another home,” she said. She looked into public housing, but there are 10,000 people on the wait list and it’s currently closed.

…Tawanda doesn’t know which will come down on her first, MassHealth or the roof. Any day now, the state could file suit to force her to sell the house, but she’s decided to stay put. “After my husband died I picked up the sword again,” she said. “I will fight them to the death. I will never, ever give up this fight, and I will never sign a paper saying that they own my house.”

…When Election Day came she pulled up in front of the polling station and sat there for a minute, then drove off. “It did not make me feel good,” she said. “But I felt like, Vote for what? No one cares about me.”

Medicaid Debt Can Cost You Your House – The Atlantic


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